United States Securities and Exchange Commission
LITIGATION RELEASE NO. 17181 / October 11, 2001
UNITED STATES v. FRANK L. PEITZ, DANIEL B. BENSON, PETER A. LOUTOS, SR., ROBERT D. PALADINO, RANDALL W. LAW, and MONICA M. ILES, Criminal Action No. 01CR0852 (N.D. Ill., Eastern Division)
On October 9, 2001, a grand jury in the U.S. District Court for the Northern District of Illinois (Eastern Division) returned an indictment against Frank L. Peitz, Daniel B. Benson, Peter A. Loutos, Sr., Robert D. Paladino, Randall W. Law and Monica M. Iles. The indictment arises from the offer and sale of a fraudulent prime bank trading program through Lennox Investment Group, Ltd., an entity owned and controlled by Law, and the subsequent misappropriation of funds collected from investors. The indictment charges each defendant with eight counts of wire fraud and further charges Peitz, Benson, Loutos and Paladino with seven counts each of money laundering and one count each of conspiracy to commit money laundering.
The indictment charges that the defendants raised over $11 million from at least 30 investors through the offer and sale of a purported "Small Investment High-Yield Program." The defendants obtained investor funds through material misstatements and omissions, including the following: (1) investor funds would be used in the international trading of bank instruments; (2) investor funds would be held in an escrow account or that collateral of equal value would insure the safety of investor funds; (3) investor principal was guaranteed; (4) investors would receive returns of 122 per cent per week for forty weeks during the one year term of their investment; and (5) the trading program was regulated and approved by governmental entities such as the Federal Reserve or by the International Monetary Fund. In fact, the indictment charges, the purported trading program did not exist and investor funds were not used to trade banking instruments. Rather, the defendants systematically disbursed investor funds for the benefit of themselves and their designees.
The indictment is based on the same conduct alleged in a civil action brought by the Commission's Fort Worth District Office in June 1998. [SEC v. Lennox Investment Group, Ltd., et al., USDC/ND/TX [Fort Worth Division], Civil Action No. 498-CV-536-Y]. The Commission's complaint, filed June 22, 1998, alleged that Peitz, Benson, Law, and Iles, among others, violated the antifraud and securities registration provisions of the federal securities laws by engaging in the scheme described in the October 9, 2001 indictment. Specifically, the Commission complaint charged these defendants with violations of Section 5(a), 5(c) and 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The Commission's complaint named Paladino, among others, as a relief defendant, alleging that he was unjustly enriched through the receipt of funds and assets derived from investors. [Lit. Rel. 15789, June 24, 1998.]
The Commission has obtained Final Judgments against all defendants and relief defendants named in its civil action. However, a receiver appointed by the Court is continuing his efforts to marshal and conserve funds and assets on behalf of defrauded investors.
For more information on prime bank fraud, investors are advised to access the Commission's "Prime Bank" Investor Alert that provides tips on how to avoid being a victim of these scams. The investor alert can be found on the Commission's web site, at http://www.sec.gov/divisions/enforce/primebank.shtml.